Trading Lessons/Insights From Coin Flipping

Quote from JScott:

Mike, I guess you had to say it again nonetheless . . .

Good traders need good discipline . . .

If you don't have the discipline to refrain from making a childish post on a thread where people have no agenda and simply are sharing information, then your discipline is lacking. Trading will be difficult for you.

JS
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You said : "It's already been said, but if you determine your trading has a 50% win rate, then you know that 5,6,7+ losers in a row is in your future. To continue trading through a string of losses is exactly what "disciplilne" means. "

Obviously trading is already difficult for you, and repeating your mistakes over and over again is not discipline. Its insane. You seem to be seeking support to pursue bad strategies. Several of you talk about having a 50% win rate but that's mediocre. It would be like running a mutual fund and aiming to match the index ( oh wait, we had someone congratulated for doing that on here as well ).

Yes, you are free to share ideas about mediocrity. But no, you are not free to escape scrutiny when you discuss them on a forum supposably promoting excellence in trading.
 
Quote from Nine_Ender:

Obviously trading is already difficult for you, and repeating your mistakes over and over again is not discipline. Its insane. You seem to be seeking support to pursue bad strategies. Several of you talk about having a 50% win rate but that's mediocre. It would be like running a mutual fund and aiming to match the index ( oh wait, we had someone congratulated for doing that on here as well ).

Yes, you are free to share ideas about mediocrity. But no, you are not free to escape scrutiny when you discuss them on a forum supposably promoting excellence in trading.
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Given a 50% win rate, if your r/r/r is above 1, then you're above mediocrity (assuming no "externalities" like comms and slippage). Don't take my word for it, I failed every single math class after 10th grade college included.

Most of what I know about probability is from hours of analyzing Pick-3 results in my state :D
 
Quote from nLepwa:

Would you play this game with me?

You are allowed to choose any two numbers between 1 and 100.
You reveal to me one of the two numbers.

Now, I must say whether the second number is greater than the first one.

If I guess correctly, you owe me $99.
If my guess is wrong I owe you $101.

So, would you play this game with me?

Ninna
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I'll play you.

Like I mentioned, I don't have even one math class worth of credits completed in college, but this game seems simple.

For me to beat you, I only need to keep the odds of you guessing correctly as close to 50/50 as possible.

The trick is in choosing numbers in the middle of the pack, namely, 50 and 51, because in both cases you'll have as many numbers to guess that are lower as there are higher.

Although, I think if you picked a random person on the street who would've had no prior thought about this, they would make the mistake of choosing two numbers that are farther from the middle, for example, 33 and 77. In both cases, when one of them is made known to you, there are less numbers left towards one side than another, giving you better odds of guessing correctly. Example, if you know 77, then there's a 76-to-23 odds of the number being lower, and vice-versa for 33.
 
Quote from Nine_Ender:

Obviously trading is already difficult for you, and repeating your mistakes over and over again is not discipline. Its insane.
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Nine_Ender

When you make 1,000+ trades like I have, or even a few hundred, you will find that your post was regrettable. Trading is a game of positive expectancy no matter what your "win" rate is. But consecutive losers are unavoidable.

Coin flipping doesn't tell me how to avoid losers, but it tells me that even in the most controlled circumstances they happen in greater numbers than most would think. It's a concept for new folks.

Moving on . . .

J.Scott
 
"Wouldn't flipping a coin for entry give you a 50% win rate?"

Exactly. That's why this is a cute exercise for demonstrating a statistical expectation. But the total lack of variables outside the buy/sell-heads/tails comparison makes it a very poor trading proxy. Which of course is why the personnel manager at Susquehanna might want to play a few hands of poker with a interviewee versus a coin flip.
 
Quote from Nine_Ender:

Several of you talk about having a 50% win rate but that's mediocre. It would be like running a mutual fund and aiming to match the index ( oh wait, we had someone congratulated for doing that on here as well ).
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Okay, so the first step towards enlightment and progress is admitting that one is clueless. Your post above essentially admits your level of knowledge, so maybe now we can make some progress here. Just take a few deep breaths and accept the fact that you're in a bit over your head.

Here is some code that uses a pseudo random generator to generate entries and exits at a specific time (5 minutes prior to market close). The system either goes long or short at 12:55pm (PST), it can hold if its long and no short is generated...

Ran on ES futures, 1 contract per trade.

AFL Code:

SetTradeDelays(0,0,0,0);
SetOption("InitialEquity",100000);
SetOption("MaxOpenPositions",1);
SetOption("CommissionMode",3);
SetOption("CommissionAmount",0);
SetPositionSize(1,spsShares);
rand = Random();

Buy = Cover = TimeNum()==125400 AND rand < 0.50;

Sell = Short = TimeNum()==125400 AND rand >= 0.51;


These are the results:

attachment.php
 

Attachments

Quote from Mike805:

So, what's happening here? Why do we see a 50% win rate with an apparent "edge"?
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Awesome Mike! We'll see if some of the nay sayers can connect the dots...

Masterjaz
 
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